A very different type of SEZ (Special Economic Zone) has emerged to cater to so-called “digital nomads” — office workers and entrepreneurs who, thanks to the internet and trends following Covid-19, no longer need to be tied to a physical location. As per current norms, WFA (Work from Anywhere) is expanded term in addition to WFH (Work from home).
The past three years have further come with many shocks, all of which threaten to disrupt traditional business models. The pandemic, the supply chain crisis, inflation, war in Ukraine, and the OECD’s 15% minimum corporate tax have all taken their toll.
The Ministry of Commerce and Industry through Department of Commerce has actively considered easing the WFH norms for SEZ in an earnest attempt to resolve the differences between developers and (information technology/information technology enabled services) i.e., IT/ITES companies and accordingly issued new Rule 43A under SEZ (Third Amendment) Rules, 2022 on 14 July 2022 and further issued guidelines providing Standard Operating Procedure for WFH permission by instruction no. 110 dated 12 August 2022.
Accordingly, as per the SEZ rules, IT/ITES SEZs have the flexibility to permit a 50 per cent or higher percentage staff to WFH or from any place outside the SEZ i.e., WFA, subject to permission and conditions. The key aspects of new Rule 43A of SEZ Rules and SOP for WFH permission have been decoded in this article in ensuing paras:
Eligible employees for WFH:
Following employees of IT/ITES SEZ are eligible for WFH:
- Employees of IT/ITES SEZ Unit
- Employees, who are temporarily incapacitated;
- Employees, who are travelling;
- Employees, who are working offsite; and
- Contractual employees
With following conditions:
- The Unit shall maintain accurate attendance record for the entire period of permission for WFH and shall submit to the Development Commissioner (DC), from time to time.
- The work to be performed by the employee permitted to WFH shall be as per the services approved for the Unit, and the work is related to a project of the Unit.
- The Unit shall ensure export revenue of the resultant products or services to be accounted for by the Unit to which the employee is tagged.
- Where an employee ceases to be part of the project of the Unit, the employee shall be un-tagged from the Unit and the Unit shall surrender the identity card as per Rule 70 (2) of SEZ Rules.
Permission for WFH:
The IT/ITES SEZ unit will have to formulate a scheme for WFH and take approval from respective DCs. In case, the approval is not granted within 15 days of the application for WFH, the application shall be deemed to have been approved. Key aspects of the approval are:
| Aspect | Detail |
| Application for WFH | Application preferable through email (To DC and CC to Specified Officer) through registered email id or physical application, which shall contain: Terms and conditions of WFH, Date from which the permission for WFH shall be utilised Total number of employees including contractual, at the unit Excel sheet containing name of designation of employees, ID card number, validity of ID card, detail of laptop/other assets assigned to employees, duration of permission (in case different from general permission) Whether WFH is for all employee or for particular categories In case the WFH intends to cover 50% or higher percentage, the details of all employees Undertaking to ensure attendance at the unit based on percentage provided in the scheme and as approved. SEZ can decide internally on how WFH to be implemented and the same is not required to be submitted to SEZ authorities. Details of employees eligible for WFH Duration of permission (maximum of one year permission allowed at the time) |
| Time limit for WFH application | For units who intend to implement WFH – 15 days in advance from the date that such WFH scheme is intended to be put in effect, except in case of the employees who are temporarily incapacitated or travelling. For units already operating under WFH Option: Within a period of 90 days from the date of SEZ (Third Amendment) Rules, 2022 (one time exception) In case of new employees, provisional permission for WFH may be availed on an immediate basis regularized through application within 15 days. |
| Validity of approval | One year at a time. The same can be further extended by one year. |
| Process and Time line for approval | The DC shall process and approve the application within 15 days of submission and in the event, no communication is received from DC, the application shall be deemed to have been approved. The application shall not be denied or revoked without due opportunity of being heard and any decision denying or revoking such approval shall provide the reasons for the same. |
| WFH for 50% or higher percentage | The DC may approve a higher number of employees to WFH for any bona-fide reason to be recorded in writing. |
IT Hardware for WFH employees:
For the employees having WFH, the SEZ unit needs to provide IT hardware such as laptop, computer, video projection system, other electronic equipment and secured connectivity (for virtual private network, virtual desktop infrastructure) to establish a connection between the employee and work related to the project of the unit. The same can be removed with the prior permission of the Specified Officer to temporarily remove such goods to the Domestic Tariff Area (DTA) without payment of duty or integrated goods and services tax (IGST), subject to the following procedure:
(i) the unit shall account for the goods removed temporarily;
(ii) the unit shall issue a certificate authorising the employee by name and giving the full specification, namely, serial number and model number and make of the equipment intended to be taken outside the processing area temporarily and a copy of the certificate shall be endorsed to the Specified Officer and acknowledgement received by the Unit; and
(iii) the Unit shall maintain a record of such certificate of authorisation issued under clause (ii) for temporary removal of equipment.
The Specified Officer may approve the removal of goods required by an employee permitted to WFH and shall be valid up to such period the permission for WFH is valid.
The requirement of endorsement certificate by the Special Officer shall be implemented in such a manner so as to avoid any hardship to employees who are doing WFH. Further, the endorsement may be done based on details submitted by the unit. In case where required by the Specified Office, the Units can get the physical inspection at the time when the employees come to the Unit premises.
Way forward:
Considering the WFH is allowed for IT/ITES SEZ, the SEZ unit needs to take following steps:
- Evaluate total number of employees who shall be covered under WFH i.e., employees with WFH option, employees with flexi WFH option and employees at office.
- Identify the total area required under SEZ to evaluate partial surrender of SEZ or not.
- Feasibility study for partial surrender of SEZ area.
- Apply for WFH approval to DC for 50% of employees with supporting documents and detail.
- In case, the WFH approval is for more than 50% of employees, provide additional bona fide reason.
These guidelines will not only bring procedural clarity for businesses but also ensure that a uniform process is followed across SEZs in the country, helping businesses avoid the tedious talks of undertaking different processes for different SEZ jurisdictions,.
Further, the Ministry of Commerce and Industry is working to replace the existing SEZ law with new legislation to enable states to become partners in ‘Development of Enterprise and Service Hubs’ (DESH).
About the Author – VINEET SUMAN DARDA, Co-Founder, Managing Partner, Darda Advisors LLP
Vineet has over 17+ years of consulting experience in leadership role in Tax and Regulatory Stream [Indirect tax including GST (around 13 years in Big 4)] and working with leading players in diverse industry sectors. He has delivered successfully as part of Darda Advisors LLP on various approvals and disbursements under Central and State Policies including ongoing MEITY and other Ministries’ PLI Schemes and various cross border transactions including FTA issues. Vineet has conducted various sessions (Seminars and webinars) on various tax and regulatory topics (including GST) at Client’s place, Business Parks, and other forums (ASCI, FTCCI, JICA, KOTRA, EPC, ICAI, ICFAI, JITO, RGA and others).
